Southwest Airlines 2012 Annual Report Download - page 58

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unit costs, excluding fuel, profitsharing, and special items, to increase in the five to six percent range as
compared to first quarter 2012’s unit costs, excluding fuel, profitsharing, and special items. See the previous
Note Regarding Use of Non-GAAP Financial Measures.
Salaries, wages, and benefits expense for 2012 increased by $378 million compared to 2011.
Approximately $139 million of this increase was due to the inclusion of the full year of AirTran results in 2012,
while 2011 results only include AirTran Salaries, wages, and benefits expense following the acquisition date.
Excluding the results of AirTran in both periods, Salaries, wages, and benefits expense increased 6.0 percent on a
dollar basis for 2012 compared to 2011. Approximately 64 percent of this year-over-year increase was a result of
higher salaries expense and approximately 18 percent was a result of higher Employee benefits expense, both
primarily due to an increase in active full-time equivalent Employees. In addition, approximately 11 percent of
the increase was due to an increase in profitsharing expense resulting from higher income available for
profitsharing. The Company’s profitsharing expense is based on profits that exclude the unrealized gains and/or
losses the Company records for its fuel hedging program as well as acquisition and integration costs. See Note 10
to the Consolidated Financial Statements for further information on fuel hedging. On a consolidated basis,
Salaries, wages, and benefits expense per ASM for 2012 increased 1.9 percent compared to 2011. The majority
of the per-ASM increase was due to an increase in active full-time equivalent employees. Based on current cost
trends and anticipated capacity, the Company expects Salaries, wages, and benefits expense per ASM in first
quarter 2013, excluding profitsharing, to increase from first quarter 2012’s Salaries, wages, and benefits expense
per ASM, excluding profitsharing.
Southwest’s Pilots, totaling approximately 6,000 Employees, are subject to a collective-bargaining
agreement between the Company and the Southwest Airlines Pilots’ Association (“SWAPA”), which became
amendable in August 2012. The Company continues to engage in discussions on a new agreement with SWAPA.
Southwest’s Customer Service, Customer Support, and Services, totaling approximately 6,400 Employees,
are subject to a collective-bargaining agreement between the Company and the International Association of
Machinists and Aerospace Workers (“IAM”), which became amendable in October 2012. The Company
continues to engage in discussions on a new agreement with IAM.
Southwest’s Mechanics, totaling approximately 2,100 Employees, are subject to a collective-bargaining
agreement between the Company and the Aircraft Mechanics Fraternal Association (“AMFA”), which became
amendable in August 2012. The Company is currently in discussions on a new agreement with AMFA.
Southwest’s Aircraft Appearance Technicians, totaling approximately 220 Employees, are subject to a
collective-bargaining agreement between the Company and AMFA, which became amendable in February 2009.
The Company and AMFA ratified a new contract during May 2012.
Southwest’s Dispatchers, totaling approximately 200 Employees, are subject to agreements between the
Company and the Transportation Workers of America, AFL-CIO, Local 550 (“TWU 550”), which became
amendable in 2009. The Company and TWU ratified a new contract during June 2012.
Southwest’s Ramp, Operations, Provisioning, and Freight Agents, totaling approximately 9,800
Employees, are subject to an agreement between the Company and the TWU Local 555 (“TWU 555”), which
became amendable in June 2011. The Company is currently in discussions on a new agreement with TWU 555.
Fuel and oil expense for 2012 increased by $476 million, or 8.4 percent, compared to 2011. Approximately
$291 million of this increase was due to the inclusion of the full year of AirTran results in 2012, while the 2011
results only include AirTran fuel and oil expense following the acquisition date. Excluding the results of AirTran
in both periods, Fuel and oil expense for 2012 increased 3.8 percent on a dollar basis, versus 2011. On a per-
ASM basis, the Company’s 2012 Fuel and oil expense increased by 2.1 percent versus 2011. Both of these
increases were primarily due to a 3.4 percent increase in the Company’s average fuel cost per gallon. As a result
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